The Belarusian government should not set wage targets, International Monetary Fund (IMF) experts say in an analytical paper exploring the causes of recent currency crises in Belarus.
In 2001-2014, the Belarusian authorities «pursued activist wage policy by setting wage targets,» says the paper. «The government also had administrative instruments necessary to achieve these targets, reflecting its dominant role in economy,» it says.
The experts write that the wage policy and state program lending spurred domestic demand, which resulted in a wider current account deficit. «The country suffered three crises episodes in 6 years – in 2009, 2011 and 2014. Prior to the each crisis, the current account deficit widened to more than 8 percent of GDP,» says the paper.
«The government should abandon wage targets and phase out state program lending to remove the underlying source of the imbalances and ensure lasting stabilization,» the experts write.
They welcome the Belarusian government's plans to reduce state program lending and its switch to monetary targeting and managed floating exchange rate in 2015 as «steps in the right direction.»
Belarus has asked the IMF to provide a loan of $3 billion and expects the international institution to make a decision on the request in the first three months of this year.
